Private investors ignore market despite FTSE highs

Public confidence in the stock market has fallen over the past six months, even though share prices have hit five-year highs. Just 44 per cent of private investors plan to make additional investments in the stock market over the next few months, down from 54 per cent in March, according to research from the Association of Investment Companies (AIC).

The AIC said even though the FTSE 100 Index of leading UK shares last week came close to hitting 6,200, its highest level since early in 2001, a number of private investors remained convinced that property remains more profitable.

A third of investors in the survey said they expected property to outperform shares over the next six months. The UK stock market is up by about 11 per cent over the past year, compared with a 7 per cent return from residential property.

Even among private investors classed as the most active stock market participants by the AIC, just 44 per cent think shares will be a better place to hold money, down from 71 per cent in March.

Active investors said their two biggest concerns about equity investment were the possibility of a stock market crash, or instability in the Middle East undermining returns. Among investors as a whole, rising inflation and interest rates were more likely to be the factors underlying their lack of confidence.

Annabel Brodie-Smith, of the AIC, said: "The UK public's love affair with property is still far from over and reports of an upturn in the housing market have boosted investors' confidence. Investors' confidence in the stock market has clearly been knocked by this summer's market volatility."

The AIC's research follows a similar warning from the Investment Management Association. Its latest sales figures, for the month of August, show that private investors are putting less money into stock market funds and individual savings accounts (ISAs) than they were 12 months ago.

The IMA's figures also show that even among investors prepared to back the stock market, property funds, offering exposure to companies such as housebuilders, are the most popular choice.